Pattern and Determinants of United States' Intra-Industry Trade

This study identifies country and industry-level determinants of intra-industry trade and its components, vertical (VIIT) and horizontal (HIIT) intra-industry trade, in bilateral U.S. trade. Unlike studies for other countries, U.S. intra-industry trade is found to be dominated by HIIT rather than VIIT. This finding is important because HIIT tends to have relatively low factor adjustment costs relative to VIIT. Industry specialization takes place within, rather than across, product lines within the same industry. Two new variables contribute to our understanding of intra-industry trade. Country-level product differentiation and the interaction between technological innovation and foreign direct investment are found to be important determinants of both HIIT and VIIT. Distance, foreign direct investment flows, scale economies, and seller concentration affect HIIT but not VIIT. Other influences exert similar influences on components of intra-industry trade.